U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19567 / February 16 , 2006
Accounting and Auditing Enforcement
Release No. 2375/ February 16 , 2006
Securities and Exchange Commission v. Eric J. McCracken, et al., Civil Action No. 8:04-CV-02288-SDM-MAP (M.D. FL)
SEC Settles Case Against Eric J. McCracken, Former CFO of Aerosonic Corporation
The Securities and Exchange Commission (SEC) announced today that it has settled its civil injunctive action against Eric J. McCracken, the former Chief Financial Officer of airplane instrument manufacturer Aerosonic Corporation (Aerosonic). McCracken consented, without admitting or denying the allegations in the Complaint, to the entry of a Final Judgment of Permanent Injunction and Other Relief (Final Judgment), which the court entered on February 10, 2006. The Final Judgment permanently enjoins McCracken from violating Section 17(a) of the Securities Act of 1933 (Securities Act), and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, 13b2-2, and 13a-14, thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13 (b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13, thereunder, and bars him from serving as an officer or director of a public company. The Final Judgment further orders McCracken to pay $40,000 in disgorgement, but does not impose a civil penalty against McCracken based on the sworn financial statements and other information he provided to the Commission.
In its Complaint, the SEC alleged that from January 1999 through December 2002, McCracken and Aerosonic's former CEO implemented various accounting schemes designed to artificially inflate Aerosonic's reported pre-tax earnings. Among their schemes, they allegedly caused Aerosonic to overstate inventory by falsifying inventory records and by failing to provide adequate reserves for Aerosonic's obsolete and slow moving inventory. In addition, McCracken and the former CEO allegedly caused Aerosonic to report inflated earnings by recording fictitious and premature revenue. McCracken financially benefited from his fraudulent activities by reaping lucrative bonuses and by selling his Aerosonic stock while its price was artificially inflated as a result of Aerosonic's false filings and press releases.
For further information, see Litigation Release No. 18935 (October 20, 2004). [Securities and Exchange Commission v. John Mervyn Nabors and Eric J. McCracken, Civil Action No. 8:04-CV-02288-Merryday (M.D. Fla. Oct. 18, 2004)].